Kelsay Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range.

-The company's contribution margin ratio is closest to:
A) 39.0%
B) 51.2%
C) 11.0%
D) 48.8%

Question

Kelsay Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range.
 
-The company's contribution margin ratio is closest to:
A) 39.0% 
B) 51.2% 
C) 11.0% 
D) 48.8%

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $2,788,000 - ($1,156,000 + $272,000) = $2,788,000 - $1,428,000 = $1,360,000
CM ratio = Contribution margin ÷ Sales
= $1,360,000 ÷ $2,788,000 = 0.488

Kelsay Corporation Has Provided the Following Contribution Format Income Statement